Glut! Govt in a rush to sell wheat

India is likely to produce 250.14 million tonnes of food grains during 2012-13 (which includes kharif and rabi crops in the field at present). This is notwithstanding a drop of 7 million tonnes in production during the kharif season owing to erratic monsoons.

Wheat production had touched a record 94.9 million tonnes in 2011-12 crop year, leading to bumper procurement. However according to a Union agriculture ministry communiqué a couple of days ago, wheat output may decline to 92.3 million tonnes in the year ending June 30. This (if it happens) would be the first drop since 2004-2005, according to the ministry. India is the world’s second largest producer of wheat.

Significantly, the centre had a wheat stock of 37.65 million tonnes as of December 2012, which is more than double the stipulated buffer and strategic stock requirement of 11.2 million tonnes as of January. Food Corporation of India (FCI)’s godowns are actually overflowing with grain stocks. This had prompted the government in July last year to decide to export 2 million tonnes of wheat from central stocks at a rate ranging between $296.70 and $319.50 a tonne. The government may not have to amend its free export policy, despite a likely drop in output, thanks to this large stockpile of wheat. India mostly exports its wheat to West Asia and Africa.

The wheat marketing year will begin in April and just before that, according to a recent report by United States Department of Agriculture (USDA), wheat exports from India are expected to touch 6 million tonnes in the 2012-13 marketing year on the back of firm global prices. However, the Food and Agriculture Organi­sation, the UN body, has pegged India’s wheat exports at a slightly lower level of 5 million tonnes for the same marketing year.

According to commodity market analysts, wheat exports from India can actually go up further with other major wheat-producing countries — including Australia. Russia and Ukraine — showing a decline in wheat output, thanks to drought. According to Food Corporation of India, exports of wheat from India may reach 10 million tonnes in the ensuing marketing year. The other reason for wheat exports to go up significantly is that India needs to empty its godowns before the beginning of the next harvesting season in March. Unless these are cleared, the huge stockpile can create great problems for India, felt commodity analysts.

“A bearish global wheat market spells trouble in pruning Food Corporation of India’s stocks. The bearish trend in global wheat prices, as reflected in the recent MMTC bids, may spell trouble for the government, which is struggling to handle the huge stocks with the Food Corporation of India. Having already permitted 4.5 million tonnes (mt) to be shipped out of public godowns, the government is aiming to allow export of another 5 million tonnes, mainly through private trade, with a view to creating storage space for the new crop that will start arriving from April. This year’s wheat crop is estimated to be as large as last year’s record 95 million tonnes,” said Emkay Commodity Research. zz